Correlation Between Invesco SP and DBX ETF

Can any of the company-specific risk be diversified away by investing in both Invesco SP and DBX ETF at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Invesco SP and DBX ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Invesco SP 500 and DBX ETF Trust, you can compare the effects of market volatilities on Invesco SP and DBX ETF and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Invesco SP with a short position of DBX ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and DBX ETF.

Diversification Opportunities for Invesco SP and DBX ETF

0.81

Correlation Coefficient

Invesco SP  DBX ETF

Very poor diversification

The 3 months correlation between Invesco and DBX is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and DBX ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DBX ETF Trust and Invesco SP is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Invesco SP 500 are associated (or correlated) with DBX ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DBX ETF Trust has no effect on the direction of Invesco SP i.e., Invesco SP and DBX ETF go up and down completely randomly.

Pair Corralation between Invesco SP and DBX ETF

Considering the 90-day investment horizon Invesco SP is expected to generate 1.56 times less return on investment than DBX ETF. In addition to that, Invesco SP is 1.09 times more volatile than DBX ETF Trust. It trades about 0.06 of its total potential returns per unit of risk. DBX ETF Trust is currently generating about 0.1 per unit of volatility. If you would invest  3,737  in DBX ETF Trust on October 21, 2024 and sell it today you would earn a total of  1,606  from holding DBX ETF Trust or generate 42.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Invesco SP 500  vs.  DBX ETF Trust

Invesco SP 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Invesco SP is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

DBX ETF Trust

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DBX ETF Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, DBX ETF is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Invesco SP and DBX ETF

The main advantage of trading using opposite Invesco SP and DBX ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP position performs unexpectedly, DBX ETF can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in DBX ETF will offset losses from the drop in DBX ETF's long position.

The idea behind Invesco SP 500 and DBX ETF Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.